2020 turned out to be successful for OTC brokers, as several factors at once contributed to the growth of volatility and, accordingly, trading volumes. March turned out to be exceptionally successful for brokers.
Cappitech, a provider of fintech solutions for banks, CFD brokers, and asset managers, has collected data from investment firms that use the company’s technology to ensure regulatory compliance and report EMIR, MiFIR.
Why do you need to offer stock trading?
The data collected by Cappitech showed brokers’ financial results during the first quarter of 2020, as well as in March when the coronavirus pandemic brought volatility back to the markets. The study involved about 50 European CFD brokers working both in the institutional and retail segments. It turned out that companies offering a diverse range of assets are in a better position.
Cappitech explained that it was not surprising that stockbrokers outperformed their peers in the first quarter (stock trading volume includes CFDs on indices and individual stocks).
A review of statistics for the five largest CFD brokers showed that in this segment, growth indicators improved by 50% compared to the 4th quarter of the previous year.
Trading volumes of CFD brokers
According to the data, over-the-counter brokers who offered and advertised their stock-related products were in a better position than those who focused on the forex and metals markets. They were able to take greater advantage of the increased volatility in the market.
Cappitech added that in general, statistics confirmed CFD brokers earned more when chaos and panic surrounded the markets.
Forex brokers are lagging
Having carefully examined the data for the last quarter of last year, Cappitech found that the five largest brokers with the highest percentage of stock transactions in the first quarter showed a weighted average growth of 105% in the first quarter compared to the fourth quarter of last year. Meanwhile, the average for all brokers was 95%.
Another interesting conclusion is that forex brokers, where 90% of all transactions accounted for currency trading, were among the laggards. Their growth rate was 46.5%, which is significantly lower than average.
Ron Finberg, who is a product and regulatory specialist at Cappitech, declared that a closer look at the statistics revealed a sharp gap between brokers with a high share of currency trading.
He also noted that companies with an extensive product line had benefited from increased customer activity. In addition, they managed to reanimate accounts on which there was no trading activity for a long time.